A buyer of real estate in Poland who enters into a development agreement is protected by the provisions of the so-called new Polish Development Act. If the developer delays the transfer of ownership of the premises, the buyer has the right to claim compensation from the developer for untimely performance of the agreement. This right stems directly from the Polish Development Act.
Legal basis – Article 35(1)(14) of the Polish Development Act
The provisions of the Development Act stipulate that the parties are free to decide whether to include contractual penalties in the agreement for the developer’s delay in transferring ownership of the premises. If they decide to include them, the development agreement must clearly specify their amount. However, the absence of a provision on contractual penalties does not deprive the purchaser of protection – in such a situation, they are entitled to so-called compensation. This compensation corresponds to the amount of statutory interest due to the developer in the event of a delay by the purchaser in making a monetary payment. This is a special solution, not found in other laws, but in practice it performs a function similar to that of a contractual penalty.
As a result, regardless of whether the development agreement provides for contractual penalties or not, the purchaser of the premises always has the right to claim compensation from the developer if the developer fails to meet the deadline for transfer of ownership specified in the development agreement.
Limitation of contractual penalties by developers in Poland – abusive nature of provisions
In practice, however, many developers apply various types of contractual penalty limits to limit their liability for damages. The most common constructions are:
- limiting the amount of contractual penalties – e.g. the maximum contractual penalty is PLN 5,000, regardless of the length of the delay,
- limiting the percentage of contractual penalties – e.g. the contractual penalty shall not exceed 3% of the price of the premises, regardless of the length of the delay.
Such contractual provisions raise fundamental doubts as to their compliance with the Development Act and the principle of balance between the parties, and are usually considered by courts to be prohibited contractual provisions in development agreements (i.e. so-called abusive clauses). The literature on this issue indicates that: “the limitation of contractual penalties in development agreements is abusive, i.e. prohibited contractual provisions, and therefore, pursuant to Article 3851 § 2 of the Polish Civil Code, it is not binding on the consumer, while the parties are bound by the development agreement in all other respects. The fact that the claimant is not bound by the limitation means that the provision in question is ineffective and occurs ex lege (cf. E. Łętowska, Contracts relating to third parties, C.H. Beck, 2005, LEX legal service). A similar position is also taken by common courts and the President of the Office of Competition and Consumer Protection in decisions concerning this type of provision.
A practical example from Polish case law:
“The court ruled that the following provision of a development agreement was abusive: ‘The contractual penalty payable to the buyer in the circumstances referred to in paragraph 1 shall be 0.1% of the amount paid by the buyer for each day of delay exceeding 60 days, but not more than 10% of that amount.” (judgment of the Polish Regional Court in Warsaw, 17th Division for Competition and Consumer Protection, of 9 September 2024, ref. no. XVII Amc 12/04)
“The court found that the following provision of the development agreement was abusive: ‘The total amount of interest and contractual penalties charged between the parties may not exceed 10% of the total price specified in § 5 of this agreement.” (judgment of the Polish Regional Court in Warsaw, 17th Division for Competition and Consumer Protection, dated 16 April 2007, file ref. no. XVII AmC 43/06:
When analysing provisions limiting the amount of contractual penalties, the courts primarily point out that the developer de facto imposes the content of the development agreement on the customer, and the lack of individual negotiations on specific provisions is not unusual. A development agreement is therefore a so-called standard agreement, which is not individually negotiated between the buyers of the premises and the developer.
What is more, developers are entrepreneurs professionally engaged in development activities. Under Polish law, pursuant to Article 355 § 2 of the Polish Civil Code, an entrepreneur is liable as a professional, i.e. a person professionally engaged in business activities in a given field. This means that the standard of due diligence of a developer in formulating the provisions of a development agreement must take into account increased expectations regarding their professional qualifications, knowledge and practical skills in conducting development activities.
Consequences of finding a provision limiting contractual penalties in a development agreement entered into in Poland to be abusive
A finding that a provision of a development agreement is abusive (unlawful) has consequences typical of the consumer protection system. The key point is that the court does not in any way ‘repair’ or “modify” the content of the agreement between the buyer of the premises and the developer, nor does it replace the disputed provision with another, ‘fairer’ solution. Under Polish law, in accordance with the principle resulting from Article 385¹ of the Polish Civil Code, a prohibited provision is simply not binding on the consumer, and the development agreement remains in force in all other respects.
No new contractual provision replaces the eliminated provision. The general provisions on liability for damages apply, including, in particular, Article 471 of the Polish Civil Code, according to which the debtor (developer) is obliged to repair the full damage resulting from improper performance of the obligation, i.e. untimely transfer of ownership of the premises.
Practical effect for the buyer of the property in Poland
The recognition that a clause limiting the buyer’s right to compensation is abusive means that the developer’s customer may claim full compensation as if there were no limitation of liability in the contract at all. For example, if the contract contained a provision such as:
‘(…) while the contractual penalty for the developer’s delay may not exceed 2% of the price of the premises’
and the court considers it to be an abusive clause, then the purchaser may claim the full amount of damage resulting from the delay, regardless of the limit specified in the disputed provision.
Practical example – how does the elimination of a clause limiting contractual penalties in Poland work?
For example, in a development agreement, the parties agreed that the transfer of ownership agreement was to be concluded by 1 January 2025 at the latest. In reality, the notarial deed was not signed until 1 October 2025, which means a 274-day delay on the part of the developer.
According to the development agreement:
- price of the premises: PLN 1,000,000
- contractual penalty: 0.01% of the price for each day of delay (i.e. 0.0001 × PLN 1,000,000 = PLN 100 per day)
- simultaneous limitation of the contractual penalty to 0.5% of the price of the premises (i.e. up to a maximum of PLN 5,000)
Consequently:
- the penalty specified in the agreement after applying the limit is a maximum of PLN 5,000 (0.5% of the price of the premises),
- the actual contractual penalty without the limitation imposed by the unfair term is: 274 days × PLN 100 = PLN 27,400
If the court finds that the clause limiting the contractual penalty (to 0.5% of the price) is unlawful, the purchaser may then claim the full amount of PLN 27,400, and the limitation to PLN 5,000 has no legal effect. The developer’s liability is restored to the level resulting from the general principles of compensation for damage and is not dependent on the artificial limit imposed in the contract.
Why is this important for purchasers in Polish real estate market?
The elimination of the contractual penalty limit by the court often has a very measurable financial effect for the purchaser of the property. Our practice shows that a delay on the part of the developer in transferring ownership often generates significantly higher amounts than those that would be possible to claim if the clause limiting the contractual penalty were applied. As the courts emphasise, this would often lead to unjustified preferential treatment of the developer over the consumer, limiting the developer’s liability for damages.
How does the court determine the abusiveness of a provision in a development agreement in Poland in practice?
Importantly for buyers of premises, in order to determine whether a provision limiting the amount of a contractual penalty is prohibited (abusive), there is no need to bring separate legal proceedings against the developer. The assessment of abusiveness takes place directly within the framework of the ongoing proceedings in which the buyer pursues their claims against the developer for contractual penalties. It is the court hearing the case that has the obligation to determine ‘ex officio’ whether the provisions of the contract concluded with the consumer:
- shape their rights and obligations in a manner contrary to good practice and
- grossly violate their interests,
which constitutes grounds for considering the provision limiting the contractual penalty to be abusive.
The consumer does not therefore have to file a separate lawsuit or conduct two parallel proceedings. It is sufficient for them to raise the argument in a single court case against the developer in Poland that, in their opinion, the provision is unlawful. Theoretically, even if the purchaser of the premises does not raise this argument during the hearing, the court is still obliged to examine the abusiveness ex officio. In practice, however, it is of course advisable to point this issue out to the court directly
Therefore, if during the proceedings the court finds that limiting the contractual penalty to a symbolic amount (e.g. 0.5% of the value of the premises) meets the conditions for abusiveness, then the provision is not binding on the consumer, the court disregards it when deciding the case, and the claimant’s claim is assessed as if the clause in the contract did not exist at all.
Summary – limitation of contractual penalties in development agreements in Poland and the rights of purchasers
In practice, buyers of premises in Poland should remember that limiting contractual penalties in a development contract can often be abusive. When applying consumer protection regulations, the court does not modify the content of the contract, but simply considers the prohibited provisions to be non-binding. As a result, the buyer of the premises may claim full compensation for untimely transfer of ownership, regardless of the artificial limits imposed by the developer.
Can the buyer of the premises in Poland choose the notary before whom the development agreement will be concluded?
The purchaser has the right to appoint a notary who will draw up the notarial deed transferring ownership of the property. This is their right under the general principles of civil law – the parties may determine the place and form of conclusion of the agreement. In practice, however, this is often not the case.
Can the parties negotiate the terms of a development agreement in Poland?
Yes, of course, a development agreement is subject to negotiation between the buyers of the premises and the developer. In practice, however, ready-made contract templates are often used, which is why the buyer of the premises should carefully review all the terms of the development agreement before signing it.
How long does court proceedings in Poland against a developer in a case concerning a contractual penalty claim take?
In our experience, court proceedings against a developer in the first instance generally take about one year, sometimes slightly longer. This largely depends on the evidence in the case and, above all, the number of witnesses heard by the court.
Is it worth suing a developer in Poland for a contractual penalty under a development agreement?
Our law firm’s practice shows that buyers who decide to pursue their claims in court in most cases obtain full compensation or successfully enforce their rights under the development agreement. Of course, we cannot guarantee a positive outcome, but in most cases developers lose their cases because they are unable to absolve themselves of liability.
Is it worth seeking the assistance of a solicitor in disputes with a developer in Poland?
Professional legal assistance allows you to:
– assess the risk and litigation strategy, including determining the realistic chances of success and advising on the optimal strategy for pursuing claims,
– conduct out-of-court negotiations – it is often possible to obtain satisfactory compensation through negotiation without the need for lengthy litigation,
– file a motion to secure claims, for example, seizure of the developer’s account,
– prepare evidence and documentation supporting the buyer’s claims,
– represent you in court during the proceedings,
– advise on financial risk, indicating the potential costs of the proceedings and possible financial scenarios.
